Oil hits record near $127 as Iran mulls output cut
Reuters
May 13 2008
NEW YORK, May 13 (Reuters) - Oil surged to a record peak near $127 on Tuesday after OPEC producer Iran said it was studying a plan to cut output despite signs record-high prices are hurting consumer nations.
U.S. crude jumped $2.00 to $126.23 a barrel by 1:45 p.m. EDT (1745 GMT), after striking a record $126.98 earlier. London Brent crude rose $1.61 to $124.52 a barrel.
President Mahmoud Ahmadinejad said a proposal to reduce Iran's crude output was being reviewed by experts, the semi-official Fars News Agency reported.
"There has been such a proposal and it is under expert review," Fars quoted Ahmadinejad as saying when asked about the possibility of the world's No. 4 producer reducing output.
Iranian Oil Minister Gholamhossein Nozari earlier said Iran was reviewing how much oil it pumps, but no decision had been taken on any changes.
"We're in a market where anything bullish is going to be able to push the price higher," said Peter Beutel, president of Cameron Hanover.
Further support came from tight global supplies of distillate fuels such as diesel after a snag at the Grangemouth refiner in Scotland.
European middle distillate stocks fell sharply in April, down 1.4 percent from March and 7.2 percent lower than a year ago, data from industry monitors Euroilstock showed.
DEMAND REVISIONS
Oil rallied back after closing lower on Monday when data showed a decline in oil imports by No. 2 consumer China in April, the first year-on-year drop in 18 months, raising further questions about demand growth forecasts.
The International Energy Agency on Tuesday said record-high oil prices will slow global oil demand growth this year to 1.03 million barrels per day (bpd), 230,000 bpd less than its previous forecast. Demand from emerging countries remained strong, however.
The U.S. Senate voted to suspend deliveries to the Strategic Petroleum Reserve until crude prices fall below $75 a barrel, repudiating the Bush administration's policy of boosting the stockpile despite high prices.
Oil prices have surged sixfold since 2002 as supply has struggled to keep pace with booming demand from emerging economies. Consumer nations have called on OPEC to ramp up production to help ease the sting of high fuel prices.
Officials from the cartel insist that speculators -- not a lack of supply -- are responsible for surging prices as investors pile into oil and other commodities as a hedge against the falling dollar and rising inflation.
Traders also were awaiting weekly U.S. inventory data due on Wednesday. U.S. crude inventories are expected to have risen for a fourth straight week, while product stocks would also rise, helped by an increase in refinery utilization, a Reuters poll of analysts found.
(Reporting by Matthew Robinson, Robert Gibbons and Richard Valdmanis in New York; Peg Mackey and Barbara Lewis in London; Maryelle Demongeot in Singapore; Editing by David Gregorio)
